What happened

Shares of Macy's (NYSE:M) jumped Monday in part due to a report in The Wall Street Journal that Saks Fifth Avenue was aiming to take its e-commerce unit public at a valuation of $6 billion. Since Macy's is one of Saks' closest competitors, that news had investors upping their valuation of Macy's.

The stock closed the session up by 17.5%.

The flagship Macy's store at Herald Square

Image source: Macy's.

So what

Macy's market cap ballooned to nearly $9 billion on the news that Saks was aiming for a $6 billion valuation on Saks.com -- triple the $2 billion valuation it gave the unit in March. Investors took that as a sign that other department stores' online channels may have also increased in value. Saks' e-commerce unit has already been formally separated from the parent company, but shoppers shouldn't notice many changes to the customer experience.

The news also came on the heels of Jana Partners calling on Macy's to separate its online business from its brick-and-mortar stores. The activist investment firm wrote in a letter to Macy's board that it believes that the chain's e-commerce business, which now generates about $8 billion in annual revenue, is worth more than Macy's as a whole is today.

Given Jana's argument, it's easy to see why Macy's shares are rallying on the Saks news. Though that $6 billion valuation is just a target for now, it does show that opinions about the department store sector are shifting, and that much of their value may lie in their online storefronts.

Now what

Macy's shares reached their highest level in nearly three years Monday, showing that perceptions of the stock have changed rapidly as it recovers from the pandemic. The chain has several hundred stores compared to just a few dozen for Saks, so divorcing the physical operation from the e-commerce business wouldn't be as easy, and management has not yet shown any interest in such a plan.

Still, investors clearly like the argument, and Jana has been successful at promoting deals in the retail space before, pushing Whole Foods to be acquired by Amazon, for example. If Saks.com can achieve a $6 billion market cap in its IPO, calls for Macy's to attempt the same spin-off strategy sure to get louder.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.